Evraz PLC · LSE:EVR
Evraz — H1 2011 Earnings Presentation
35 slides from Evraz's earnings presentation, Oct 12, 2011
Slide 1: EVRAZ Group 1H 2011 Financial and Operating Results
EVRAZ GROUP 1H 2011 Financial and Operating Results 12 October 2011
Slide 2: Disclaimer
2 Disclaimer This document does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of EVRAZ Group S.A. (EVRAZ) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment a
Slide 3: Agenda
3 Agenda 1H 2011 Financial Highlights Liquidity and Financial Position Operations by Segment Growth Strategy Key Market Developments and Outlook Appendix
Slide 4: 1H 2011 Financial Highlights
4 1H 2011 Financial Highlights
Slide 5: 1H 2011 Summary
5 1H 2011 Summary US$ mln unless otherwise stated 1H 2011 1H 2010 Change Revenue 8,380 6,379 31% Gross profit 2,197 1,460 50% Consolidated adjusted EBITDA* 1,629 1,154 41% Adjusted EBITDA margin 19.4% 18.1% Net Profit** 263 176 49% EPS (US$ per GDR) 0.62 0.42 48% Interim Dividend (US$ per GDR) 0.2 0
Slide 6: 1H 2011 Financial Highlights
6 1H 2011 Financial Highlights ◦ Significant growth in revenues and EBITDA in 1H 2011 vs. 1H 2010 as a result of market recovery ◦ Revenue growth was driven primarily by prices increases as EVRAZ operated at high capacity utilisation levels in 1H 2011 ◦ EVRAZ benefits from high level of vertical int
Slide 7: Cost Leadership
7 Cost Leadership ◦ Increased costs in 1H 2011 reflected mostly growth in raw materials prices ◦ High level of vertical integration into iron ore and coking coal helped to partially mitigate negative impact of escalating prices ◦ Approx. 60% of consolidated operating costs are rouble denominated ◦ E
Slide 8: Improved Business Fundamentals
8 Improved Business Fundamentals ◦ EBITDA and EBITDA margin progression 31 December 30 June ◦ Focus on financial management 2009 2011 ◦ Reduction of total debt level Net Debt US$7,230m US$6,042m ◦ Significant improvement of leverage Leverage (Net Debt/LTM 5.8x 2.1x ◦ Successful refinancing of short-
Slide 9: Liquidity and Financial Position
9 Liquidity and Financial Position
Slide 10: FCF Generation
10 FCF Generation ◦ Substantial free cash flow generation in 1H 2011 ◦ Release of working capital in spite of higher level of activity and higher prices ◦ Major uses of FCF in 1H2011 were: US$402 million increase in cash, US$275 million net repayment of loan principals, US$51 million purchase of non
Slide 11: Dividend Policy
11 Dividend Policy ◦ On 10 October 2011 the Board of EVRAZ Group S.A. approved a new dividend policy and the payment of interim and special dividends for 1H 2011 ◦ First dividend payment since 2008 ◦ The Company believes that the new policy and dividend payment creates a balanced approach towards re
Slide 12: Liquidity and Debt Maturity Profile
12 Liquidity and Debt Maturity Profile ◦ Refinancing steps significantly strengthened the Group’s liquidity profile: ◦ In April 2011, EVRAZ issued US$850m bonds due 2018 at 6.75%, the lowest ever coupon for EVRAZ Eurobond issues ◦ Part of the proceeds from the issue was used to purchase approx. US$6
Slide 13: Operations by Segment
13 Operations by Segment
Slide 14: Steel: CIS
14 Steel: CIS Steel Product Sales, Domestic vs. Export ◦ Full utilisation of Russian and Ukrainian steelmaking ‘000 tonnes capacities maintained in 2011 ◦ In 1H 2011 domestic steel sales accounted for 68% of 6,000 5,532 5,541 EVRAZ’s Russian and Ukrainian mills’ steel sales 5,000 32% compared to 53%
Slide 15: Steel: North America
15 Steel: North America ◦ Gradual recovery in demand ◦ Sales volumes of steel products increased by 4% in 1H 2011 vs. 1H 2010 ◦ Flat-rolled steel volumes increased by 11%; railway products by 34% ◦ Average prices of all product categories increased with the largest increase in flat-rolled products (
Slide 16: Steel: Europe, South Africa
16 Steel: Europe, South Africa Steel Product Sales Volumes, ◦ EVRAZ’s European mills sales volumes increased by European Operations ‘000 tonnes 23% in 1H 2011 vs. 1H 2010 740 ◦ European flat-rolled product sales volumes increased 800 700 603 109 by 23%, which largely reflected the increased 600 92 5
Slide 17: Coal Mining
17 Coal Mining ◦ Volumes of coking coal mined in 1H 2011 increased by 10% vs. 1H 2010 but remain affected by persisting difficult geological conditions at some mines and adjusting production plans due to more conservative approach to accident prevention ◦ Coking coal self-coverage scheduled to incre
Slide 18: Iron Ore Mining
18 Iron Ore Mining ◦ External sales volumes of iron ore products are doubled and increased to US$354 million in 1H 2011 compared US$117 million in 1H 2010 ◦ Iron ore production increased by 8% to 10.4 million tonnes ◦ Self-coverage in iron ore was maintained at around 100% ◦ Costs remain in line wit
Slide 19: Growth Strategy
19 Growth Strategy
Slide 20: Growth Projects
20 Growth Projects Projects in Final Stage of Completion ◦ Rail mill modernisation enabling production of high value-added products ◦ PCI installation at Russian steel mills Projects in Progress ◦ Construction of Yerunakovskaya VIII mine, 2 mtpa of coking coal ◦ Exploration of Sobstvenno-Kachkanarsk
Slide 21: Update on Key Investment Projects
21 Update on Key Investment Projects 2011 Total Cum CAPEX by 1H planned Project CAPEX 31.12. 2010 2011 CAPEX Project Targets Reconstruction of rail mill at $485m $225m $33m $140m ◦ Capacity of 950k tonnes of high-speed rails, including United ZSMK (former NKMK) 450k tonnes of 100 metre rails ◦ On-st
Slide 22: CAPEX Dynamics
22 CAPEX Dynamics ◦ Return to investment in modernisation projects and mine development in 2010 ◦ FY 2011 budgeted CAPEX of US$1.2 billion ◦ CAPEX over the next several years expected at the level of 2011 US$ mln 1,200 1,103 1,000 832 800 600 462 441 400 200 - 2008 2009 2010 1H 2011 Maintenance, Ste
Slide 23: Key Market Developments and Outlook
23 Key Market Developments and Outlook
Slide 24: Recent Market Developments
24 Recent Market Developments Evraz Selling Prices ◦ We are observing resilient demand across major US$/t product groups in our markets 1,200 1,100 ◦ Current steel-making capacity utilisation: 1,000 900 ◦ Russia – 100% 800 700 ◦ Ukraine – 70% 600 500 ◦ North America –100% 400 Jan-10 May-10 Sep-10 Ja
Slide 25: 2011 vs 2008-2009
25 2011 vs 2008-2009 End 2008-beginning 2009 30 September 2011 Very few forward sales on export contracts Export contracts are sold 2.5 months in advance No new orders Normal flow of orders Up to 5 months of stocks at traders Low stocks Risk of non-payments No sales on credit – risk of bad debts is
Slide 26: Outlook
26 Outlook Global economy and the steel industry continue to face challenges and remain very volatile EVRAZ retains a strong order book and high capacity utilisation Inventories at traders and at our mills and ports are very low Recent trading has been impacted by scheduled repairs, lower production
Slide 27: Summary
27 Summary Strong 1H 2011 results reflecting the recovery of steel and raw material markets Obtaining benefits from enhanced raw material prices due to the Group’s high level of vertical integration Improved liquidity position and reduced debt level following continuous refinancing in 1H2011 Renewed
Slide 28: Appendix
28 Appendix
Slide 29: Global Operating Model
29 Global Operating Model 240 Russia/CIS 402 6,420 2,607 1,054 Europe 400 590 4,208 North America 110 Asia 410 2010 Steel Sales Volume South America Africa 2010 Steel Sales Volume by Geography 110 by Product Africa Other Europe Tubular 4% 3% 6% Construction 9% Russia & CIS Steel Mills Railway 32% No
Slide 30: Steel Products: Sales by Market
30 Steel Products: Sales by Market ’000 tonnes US$ mln 3,500 3,000 3,331 2,661 3,000 2,500 2,518 2,500 2,433 2,000 2,000 1,652 1,598 1,500 1,586 1,339 1,441 1,231 1,500 1,307 1,015 1,000 1,000 758 858 704 453 442 431 500 500 359 309 300 292 222 257 0 0 Russia CIS Europe Americas Asia Africa & Russia
Slide 31: Consolidated Revenue: Geographic Breakdown
31 Consolidated Revenue: Geographic Breakdown 1H 2010 1H 2011 Africa & Other Africa & RoW Asian RoW 3% 7% 3% Other Asian Thailand 12% 4% China Thailand Russia 1% Middle East 4% 33% 3% Russia China 40% 3% Middle East Europe 4% 13% Europe 9% Ukraine 4% Other CIS Ukraine Americas 4% Americas 4% 24% 22%
Slide 32: Cost Structure by Segment
32 Cost Structure by Segment Cost Cost Structure Structure of of Steel Steel Segment Segment (% (% of of cost cost of of revenue) revenue) Cost Cost Structure Structure of of Mining Mining Segment Segment (% (% of of CoR) CoR) 20% 23% 17% 13% 9% 9% 17% 15% 9% 8% 24% 26% 5% 3% 8% 9% 13% 8% 6% 4% 11%
Slide 33: Russian Government Infrastructure Spending
33 Russian Government Infrastructure Spending The Russian Government planned spending of of US$30bn on investments in 2011, including US$23bn on construction RF Capital Investments in 2011 Ongoing programmes include: US$bn ○ New construction related to Sochi 2014 35 32(1) ○ Infrastructure developmen
Slide 34: Adjusted EBITDA
34 Adjusted EBITDA Six months ended 30 June (millions of US dollars) 2011 2010 Consolidated Adjusted EBITDA reconciliation Profit from operations 859 691 Add: Depreciation, depletion and amortisation 501 472 Impairment of assets 32 54 Loss on disposal of property, plant & equipment 17 11 Foreign exc
Slide 35: IR@evraz.com www.evraz.com
35 +7 495 232-13-70 IR@evraz.com www.evraz.com